Transforming a business model, the DoubleDragon way

Less than two months ago, DoubleDragon Properties Corp. opened the 23rd community shopping mall under its increasingly popular “CityMall” brand in Danao City in Cebu.

Like most of the 22 other CityMall openings around the country, the event was a big one for the host communities of the growing retail chain owned jointly by partner tycoons Edgar “Injap” Sia II and Tony Tancaktiong. But it was hardly noticed by the national business media.

Also attracting scant attention among company watchers was a key statistic that reinforces the new direction that the property development firm has taken in recent months: “We are now the largest commercial property lessor in ‘tier three’ cities,” Sia told the Inquirer shortly after the Danao mall was mobbed by thick opening day crowds.

A little over a week later, CityMall opened another location in Calamba, Laguna, and, nine days later, its 25th community mall in Koronadal City, South Cotabato — all sites swamped on their opening days and immediately after by shoppers excited to experience the convenience of big city retail establishments in their own smaller locales.

For Sia, the strategy is simple: To build relatively small to mid-sized shopping malls in locations where the population has enough spending power and hunger for brand name retailers that larger shopping chains like the SM, Robinsons or Ayala groups still find too small for their scale.

Surely all the large shopping mall chains would be present in Cebu City or Davao City, but what about Basilan, which is just a short hop away from perennially troubled Jolo? Anyone can build malls in the cities of Bacolod or Iloilo where spending capacity has historically been high, but what about areas where consumers’ buying power is rising rapidly like Isulan in Sultan Kudarat or Aparri, Cagayan?

DoubleDragon’s main criteria for site selection makes a lot of common sense: all CityMalls — and all future sites — must be secure, and be located along national highways or nearby roads or city centers. The goal is nothing less than maximum visibility to the company’s target market, which is tired of traveling two or three hours to the next big city just to enjoy Jollibee Chickenjoy or buy groceries at an SM supermarket.

“These are areas when people need the conveniences of modern day living, but are still too small for the big shopping malls,” said the 40-year-old billionaire best known for founding the Mang Inasal chicken chain. “There’s a big demand in those areas, and that’s where we want to be.”

CityMall is the biggest and most visible part of DoubleDragon’s business lines, but there are other key elements that are also in play. And under Sia’s plan, all four “legs” of the company — retail leasing, office leasing, industrial leasing and the hospitality business — will be integral to the ongoing transformation of the publicly listed company’s revenue model.

“At the start, most of our revenues came from nonrecurring sources,” he said. Indeed, in 2016, 90 percent of DoubleDragon’s revenues were nonrecurring like outright property sales, while only 10 percent came from the rental business.

As of this year, that ratio has already improved to a 30-percent slice for recurring revenues, while 70 percent comes from nonrecurring sources.

“By next year, the ratio will be 50-50 as some of our projects come online,” Sia declared boldly. “By 2020, the ratio will be completely reversed from what it looked like last year — 90 percent recurring, and only 10 percent nonrecurring.”

The plan is nothing short of ambitious.

In just three years, the Iloilo native wants his Hotel 101 and Jinjiang Inn network to have 5,000 hotel “keys” (hospitality industry-speak for rooms available to guests). This business line will provide 8 percent of DoubleDragon’s revenues.

Another new business leg, the industrial leasing arm under the CentralHub brand, will have 100,000 square meters of warehouse space for lease to companies that need large logistics operations. By 2020, this line is envisioned to provide 8 percent of the group’s revenues.

The most visible project of the group in Metro Manila — the DD Meridian Park complex at the corner of Roxas Boulevard and Edsa in Pasay City—will then provide 300,000 square meters of leasable office space for 25 percent of the group’s revenues.
Finally, the CityMall brand is envisioned to grow to a network of 100 community malls over the next few years, providing 700,000 square meters of commercial leasing space across the country. This will make up 58 percent of the group’s revenues.
All told, DoubleDragon’s goal is to build a portfolio of 1.2 million square meters of leasable space in just three years.
But Sia has another goal on top of this. He doesn’t just want DoubleDragon to be a big name in the second- and third-tier cities which host his shopping malls. He also wants it to be a household name as far as the financial markets of the big city — Metro Manila — is concerned.

“One of our goals is to contribute to the growth of the Philippine economy,” he said. “That’s why we take our participation in the local capital markets seriously.”

DoubleDragon is in the process of obtaining regulatory approval for the sale of P7.5 billion worth of new shares on the local stock market — a move that will strengthen the firm’s financial position, increase trading volumes of its stock, and allow the entry of more institutional investors.

Indeed, with all this happening at the same time, one would think that the company chair would be overwhelmed by managing a company transformation and raising fresh capital at the same time. Difficult? Maybe. Challenging? Definitely.